Pricing 101: A guide for accountants

Pricing for accountancy services typically involves either a fixed fee or hourly rate model, with the latter becoming increasingly rare. Fixed-fee arrangements offer clients clarity and predictability, often incorporating core services like tax filing, payroll, and financial reporting, but may vary significantly depending on the complexity of the business, its size, and its unique needs. Additional services, such as business advisory, tax planning, or online payments setup and management - embracing Direct Debit, card payments, digital wallets, etc - may attract extra costs.

To give you some context, the timesheet, first developed by law firms in the 1950s, allowed accountants to track what to charge for their services. But, pricing models based on time sheets and billable time are fast disappearing. Cloud technology is partly responsible for allowing accountants to offer better advice in less time, with less operational overheads. In some instances, this has resulted in the ‘commodification’ of compliance services, but the value is not viewed the same by all clients. To derive maximum revenue, it’s important to flex the pricing of services according to clients on a case-by-case basis.

Why accounting pricing models have changed

The ubiquity of broadband and smart devices means businesses are increasingly running their operations online and in the cloud, and many previously manual tasks are now automated.

For example, it used to make sense to charge for bookkeeping services by the hour based on the number of transactions accountants could manually enter.

Enter cloud accounting software such as Xero and QuickBooks Online, with their application of live bank feeds, which allow for an increasing amount of bookkeeping entries to be automated.

Pricing for these services is increasingly based on how effectively automation is set up so that as few transactions as possible are processed manually. Firms tend to charge for these services on a fixed basis alongside statutory accounts and tax filings. This could be a fixed fee monthly retainer (with fees made easy to collect through Direct Debit services like GoCardless).

Introducing Making Tax Digital (MTD) will likely accelerate this trend and increase the adoption of cloud accounting, as businesses have to make their HMRC filings online.

Even newer accounting software like GoProposal ensures accountants are pricing their services consistently every time to ensure you never do more work than you're being paid for.

Forward-thinking accountants are embracing these changes by reinventing themselves as business advisers and offering more lucrative services such as access to finance, cash flow forecasting and business planning.

Different types of pricing accounting services

Fixed fee

Fixed fee services are easy to understand for clients, as they create certainty around liabilities. Typically fixed fees will be for one-off or annual services. This type of pricing is the most popular among small accountancy firms, with 73.7% of those surveyed in the GoCardless 2018 Accountants Benchmarking Survey listing it as one of their pricing methods.

James Ashford, Director of MAP (Xero's Medium-Sized Firm of the Year 2020), uses fixed fees for every service in his accounting firm. He believes you should always be the authority when it comes to presenting the pricing for your accounting services to your clients:

Monthly retainer 

Monthly retainers typically cover ongoing services related to bookkeeping and compliance. Spreading out the associated client cost of these services over a 12-month period creates predictability around recurring revenues and certainty around cash flows.

Offering associated services in three distinct monthly packages (i.e. basic, standard and premium), each with its own hierarchical price, makes it easier for prospective clients to choose the accounting and tax services package most appropriate to them.

Value-based

A value-based approach sets the price for services based on what the client is prepared to pay. While this can include fixed packages, not everyone sees the same value within a particular service offering. For example, the price that one client would be prepared to pay for their tax return may be different to another.

This is likely the case for advisory-led services where clients may be prepared to pay a premium for working with professionals with expertise within their industry or for activities such as raising finance.

Meet face-to-face or via webcam to understand what a customer is prepared to pay. This way, you can assess what in particular they are looking for and engage them in pricing discussions.

Quoting a client with a live price will allow you to assess whether it is something they are likely to agree to.

Mark Wickersham FCA, author of Effective Pricing For Accountants, says:

Contingent

Contingency fees are based on taking a percentage of funds for a particular outcome. For example, this could include R&D tax credits, access to capital or debt finance.

This can make related engagements feel risk-free for clients and sometimes result in higher fee collection than by charging for time or a set cost. If you are pricing this way, it might be worthwhile to scope the engagement in more detail to have high confidence in the fee potential.

Top tips for winning a pricing strategy

Make it flexible

To upsell to clients and generate additional revenues, let clients add additional or premium services should the circumstances of their business change. Depending on their development, this may attract early-stage or high-growth businesses with different requirements. Propel by Deloitte, a division of the Big Four firm specialising in servicing ambitious startups and small businesses, offers a monthly compliance retainer as their primary package. It is also possible for clients to add advisory-related bolt-on services such as investor readiness.

Bill upfront

Billing a proportion, or all fees upfront, as opposed to collecting in arrears, will give you more certainty about fee collection and will also ease your firm's cash flow. You might want to use this approach with clients with a history of late payments. Pricing expert Mark Wickersham FCA says:

Package it up

Creating a professional brochure (online or offline) detailing your full-service offering will likely enhance the perception of your firm’s quality to potential clients. This will make them less price sensitive and can result in more effective conversations around value pricing. The brochure can also act as a great crib sheet during sales conversations to make sure you articulate the full benefits of whichever services you are trying to sell. If you offer a tiered service offering, clearly articulate how each package delineates from the others. 

Get paid

Charging for a time as a fixed price and/or as a monthly retainer, instead of billing by the hour, makes it easier to get paid due to knowing in advance what fees should be charged. Establishing a Direct Debit mandate from clients can collect these fees hassle-free. Companies are already paying for several services (i.e. Google Apps, Salesforce, shared working spaces) via this arrangement, so they should be open to paying for their accounting services in this way too. Another critical benefit of taking payment by Direct Debit is that this will significantly reduce your firm's time chasing payments. To make it easier to increase fees, structure engagement letters and contracts to allow fee changes to be agreed upon via email instead of issuing newly written correspondence.

Key takeaways

Choose the best type of pricing for you and your client

In line with changing needs of your clients, consider offering a range of payment options such as fixed fee, monthly retainer, value-based, or contingent. With GoCardless Direct Debit, once authorised by the client, it is easy to change the amount, frequency and collection dates to suit your pricing type. 

Bill upfront

Using GoCardless Direct Debit you can ensure a prompt and reliable collection of fees, providing better financial certainty for your firm. You set the Direct Debit collection schedules as per your requirements, eliminating the stress of late payments and improving your cash flow.

Communicate your pricing clearly

Put together a clear, well-structured pricing page on your website and/or in a brochure to give to clients, so they understand the full benefits of your services and precisely how much they cost.

Payments are key

Make it as simple as possible for your customers to pay you, with uncomplicated pricing schemes and the least effort required. With GoCardless Direct Debit it couldn’t be easier for clients to pay you - they simply complete the authorisation form and payments will begin on the scheduled dates without any further action required from either you or your customer.

Want a frictionless way to get paid? Get started with GoCardless and offer your clients the easiest way to pay you - Direct Debit.

Case Study

Blu Sky cloud accountants help alleviate clients’ worries by charging a manageable monthly subscription for services rather than surprising them with a hefty annual bill.

Initially, this facility was supported by a Direct Debit solution from a legacy payment services provider. However, that eventually slowed the company’s growth, and the business moved to GoCardless. on Dudgeon, Co-Founder and CEO said,

Jon continued,

Learn more about how your accountancy practice can save time, implement flexible payment options and spend more time helping clients with GoCardless Direct Debit.

We can help

Setting up payments such as Direct Debit for your clients is simple and straightforward with GoCardless. By automating the payment collection process, GoCardless drastically cuts down the administrative responsibilities of managing and tracking payments for your team. 

GoCardless makes it quick and easy to get started, and with no contracts or long-term commitment required, there’s no risk. You can set up instant, one-off, or recurring payments in the merchant dashboard in just a few clicks, and GoCardless automatically creates and sends all the necessary forms, doing all the heavy lifting for you. You can also connect to GoCardless via over  350 partner apps, such as Xero and Quickbooks.

Discover how GoCardless can be your reliable ally in managing Direct Debits making it easier for you to concentrate on what matters most - your business growth.

FAQs

What is the pricing strategy for accountants?

The pricing strategy for accountants primarily hinges on four models: hourly rates, fixed fees, value-based pricing, and retainer-based pricing. Hourly rates are the traditional method, charging for each hour of work performed. Fixed fees assign a set price for a defined scope of service, providing clarity and simplicity. Value-based pricing is aligned with the perceived value of the service to the client rather than the accountant's time or effort, thus potentially yielding higher profitability. Retainer-based pricing requires clients to pay a recurring fee for ongoing services, enabling accountants to forecast revenue and clients to manage costs. The chosen strategy should consider factors like the nature of services, market conditions, client preferences, and the operational efficiency of the accounting firm.

How much do accountants charge per hour UK?

In the United Kingdom, the hourly rates for accountants can significantly vary based on their expertise, geographical location, the complexity of tasks, and the size of the business they're servicing. On average, as of 2023, standard hourly rates for accountants typically range between £25 and £35 for junior accountants, whereas more experienced accountants often charge between £50 and £150 per hour. For specialist services such as tax planning, forensic accounting, or financial advising, rates can exceed £200 per hour. Always remember, the cost of accounting services should be viewed as an investment rather than an expense, as the right accounting advice can lead to significant cost savings and increased efficiency for your business.

How much does an accountant cost per month?

The cost of an accountant in the UK can vary significantly depending on the complexity of services required, the accountant's experience, and the specific region. However, as of 2023, you can generally expect to pay anywhere from £25 to £500 per month for an accountant. For basic bookkeeping and tax services, fees typically range from £25 to £150 per month. On the other hand, more complex services like financial planning, business consulting, or extensive tax planning can push costs towards the upper end of the range. It's also worth noting that many accountants offer flexible pricing models, such as a fixed fee, hourly rates, or a value-based pricing model, which allows them to tailor their services to your specific needs and budget. Always ensure to get a clear breakdown of services and costs upfront when engaging an accountant.